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Gold and Silver Prices Outlook for January 2013

Precious metals prices resumed their downward trend during December. This downward trend, however, was less related to the movement of the USD or the changes in other commodities prices and was plausibly related to other factors. These factors could include the changes in the supply/demand for gold, the speculations around the next move Paulson, and the change in market sentiment towards gold and silver (after all these metals haven’t perform well in the past couple of years). Several U.S reports showed signs of progress: the U.S GDP growth rate for Q3 2012 was revised up to 3.1%; non-farm payroll rose by 146 thousand in November. These reports may have contributed to the downward trend of precious metals during December. The U.S budget talks and the last attempts to avoid the fiscal cliff might affect the markets if there will be any last minute developments. Nonetheless, beyond the fiscal cliff, the U.S government could still introduce additional tax cuts to be negotiated in the months to follow. The outcome of these talks could affect not only the USD but also precious metals. The EU leaders will also resume their talks regarding the EU multi year budget in the weeks to come that could affect not only the Euro but also commodities rates. Will gold and silver continue to decline during January? The main events of the month will be the minutes of the recent FOMC meeting, the aftermath of the fiscal cliff debates, the ECB rate decision, and the economic progress of U.S, China, and Europe.

Let’s examine the precious metals market for December and give a short outlook for gold and silver for January.

Gold and silver rates started off the month declining. But then the movement of gold and silver slowed down and as they only moderately declined during the last two weeks of December. During the month, gold declined by 3.27%; silver, by 9.89%.

Let’s divide December into two parts: the table below divides the month at December 19th; I divide the month to demonstrate the change in the pace of both gold and silver; during the first part of December, gold fell by 2.6% silver by 6.5%. During the second part of December, silver declined by 3.6%; gold price, by 0.7%.

During the first part of December, the U.S dollar depreciated against the Euro, Aussie and Canadian dollar; the Euro/USD and AUD/USD currency pairs are usually strongly correlated with gold and silver prices. Conversely, during the second part of the month, the Euro/USD and AUD/USD slipped. The depreciation of the USD may have curbed the decline of gold and silver.

The chart below presents the developments of gold and silver prices during December, in which the prices are normalized to 100 on November 30th 2012.